I thought I’d share with you something that I’ve been mindful of for quite a while now and it can be quite an eye-opener.
It is one’s cost per hour to the business.
If you work it out, you realise that outsourcing any task whether it is order fulfilment or anything else becomes an easy decision.
Here is an example of an average day for me:
As you may know, we use Harvest in the business and, like the rest of my team, I log on to record, measure and review what I’m spending my time on.
This has changed *all* our behaviours, mine especially.
If you did the same, you would be surprised or even shocked at how much of your time is spent on the RIGHT stuff (or not for that matter) and it could change your working day and productivity massively too.
As you can see from last Friday I spent 5 hours 15 minutes working on “The Right Stuff” despite having been on the go from 5 am through to 7 pm which means only 37.5% of my day was productive.
Here’s the ouchie bit; working out what you cost to the business for the work that will make the boat go faster.
There are many ways you can work this out. The simplest is to work out your daily cost to the business x 1.4* and then divide it by the number of hours you were working on the right stuff so you have the hourly rate for doing the things you’re paying yourself for.
Here’s a quick example: £75kpa** (the median starting cost of an MD to a business) / 48 weeks of the year worked / 5 days per week x 1.4*= a day rate of £437.50 / 5.25 hours worked on stuff that *actually* matters = £83.33 per hour cost to the business.
The exercise made me consider a few things and made me ask myself:
→ What can I delegate to my team so I’m spending more time on the right stuff?
→ What can I outsource? Anything that costs less than my teams’ or my own hourly cost to outsource is an absolute no-brainer.
→ How can I plan my week to clear my schedule and maximise it to get more hours of “boat go faster” work in?
This is just a worked example based on the median starting salary of a Managing Director to help you work this through.**
I hope this assists the rationale for decisions regarding your own work and when to assign tasks to others, whether they are members of your team or an outsourced partnership.
Kind regards,Sam.
P.S. If tasks are costing the business any more than £20/hour to pick and pack or do admin tasks, answer the phones etc then you know what to do; outsource it. Remember to build in your opportunity cost too! 😊
P.P.S. * Times a base salary by 1.4 to obtain the real cost to the business allowing for Pension Contributions, NI, PAYE etc or you can use this calculator to do it more scientifically: https://accountingservicesforbusiness.co.uk/true-cost-of-an-employee-calculator/** source for median MD Salary: https://www.checkasalary.co.uk/salary/managing-director you’ll notice the average is £96,537.17 but UK Small Business Owners pay themselves £30k on average; so £75k is a loaded balance between the two.
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